barriers and improving the competitiveness of industries with some comparative
advantage. It would seem that re-instituting free trade in the region would be
a helpful, if not sufficient, step toward increased future development.

Statistics can be found in
Fagan ( 1970, p. 18). As explained by Fagan, the price
of traditional exports fell in the mid-1960s, while the ongoing industrialization process
required increasing amounts of imported capital goods. The structure of CACM
deprived members of their traditional instrument for regulating imbalances by controlling
the amount of imported goods, since there was no tariff on intraregional trade and a
common tariff on external trade.

When the change in area tariff structure allows an increase in total imports, there
is 4 reallocation of resources, presumably put to efficient uses, and an increase in
consumer surplus. These changes constitute an increase in welfare, and are termed "trade
creation." To the extent that regional imports replace less expensive extra-regional goods,
there is a welfare loss termed "trade diversion."

They credit
Cline and
Delgado ( 1978) as the source for stating external tariffs
between 10 and 30 percent, but the disaggregate tariff tables presented in
Cline and Delgado (Table C-5, p. 510) indicate rates for many consumer goods, plastics, food, and
other manufacturing which range from 50 to over 150 percent.

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